When purchasing a home or other real estate, the lender usually requires lender’s title insurance. This policy protects the lender’s investment should any problems arise with the title to your property. It does not, however, protect your investment in the property. To cover your investment, you need to purchase an owner’s title policy.
What is Lender’s Title Insurance and Why is It So Important?
Most lenders will not approve a buyer for a mortgage unless they purchase lender’s title insurance. When buying a home or other real property, a number of problems or defects can arise with the title. Common problems include contractors who were not paid for work done to the home prior to its sale and real estate taxes that were unpaid by the previous owner.
When these problems do arise, the lender’s title insurance covers the lender’s investment. Lenders recognize that numerous factors can lead to claims against the title, and they are all too aware of the extensive costs that can be incurred when defending an attack on the title. When the buyer purchases title insurance, however, the title company agrees to defend the lender in court and cover any and all costs incurred.
Purchasing Lender’s Title Insurance
Unfortunately, even though the lender’s title insurance only protects the lender and not the buyer, purchasing the policy is the buyer’s responsibility. However, buyers are presented with an opportunity to purchase owner’s title insurance at closing. Purchasing an owner’s title policy ensures that the buyer will also be covered in the event of any problems.
Purchasing lender’s title insurance is a necessity for most anyone who needs a mortgage to purchase a home. It is an additional cost, but it is one that cannot be avoided in most instances. If your mortgage company is requiring you to purchase a loan policy, Shore Title can help. Contact us today!